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United States : President Trump Directs Action as a Result of USTR's Section 301 Investigation on China's Laws, Policies, Practices, or Actions Related to Technology Transfer, Intellectual Property, and Innovation.

Yesterday, President Trump signed a Presidential Memorandum regarding China's technology transfer, intellectual property, and innovation-related laws, policies, practices, and actions. The Presidential Memorandum directs the Office of the United States Trade Representative (USTR) to take all appropriate action under section 301 of the Trade Act (19 U.S.C. 2411) to address the acts, policies, and practices of China that are unreasonable or discriminatory and that burden or restrict U.S. commerce. In particular, the President directs:

Tariffs T he Trade Representative shall publish a proposed list of products and any intended tariff increases within 15 days of the date of this memorandum. After a period of notice and comment , and after consultation with appropriate agencies and committees, the Trade Representative shall, as appropriate and consistent with law, publish a final list of products and tariff increases, if any, and implement any such tariffs. A fact sheet released by USTR states that USTR will propose 25 percent ad valorem duties on certain products of China, with an annual trade value commensurate with the harm caused to the U.S. economy resulting from China's unfair policies. It is not yet clear exactly which products will be targeted by these proposed tariffs, although the fact sheet notes that the proposed product list will include aerospace, information and communication technology, and machinery products. During a hearing before the Senate Finance Committee yesterday, USTR Robert Lighthizer further identified the following as products that could be hit by the tariffs: advanced information technology, automated machine tools and robotics, aerospace and aeronautics equipment, maritime equipment, modern rail transport equipment, new energy vehicles, agriculture equipment, and biopharma and advanced medical products. We understand the deliberations in this regard are ongoing.

Investment Restrictions The Secretary of the Treasury (Secretary), in consultation with other senior executive branch officials the Secretary deems appropriate, shall propose executive branch action, as appropriate and consistent with law, and using any available statutory authority, to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States. These restrictions on investment would be imposed outside the process conducted by the Committee on Foreign Investment in the United States (CFIUS).

WTO Dispute The Trade Representative shall, as appropriate and consistent with law, pursue dispute settlement in the World Trade Organization (WTO) to address China's discriminatory licensing practices. Where appropriate and consistent with law, the Trade Representative should pursue this action in cooperation with other WTO members to address China's unfair trade practices. In connection with the Section 301 determination, USTR announced today that it has filed a request for consultations with China at the WTO with respect to certain Chinese technology licensing requirements. The consultation request identifies claims under Articles 3 and 28 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) relating to China's alleged discrimination against foreign intellectual property rights holders (Article 3) and its alleged failure to ensure patent rights for foreign patent holders (Article 28).

Yesterday's announcement follows a seven-month investigation by USTR that was initiated at the President's request pursuant to Section 301 of the Trade Act of 1974. USTR's Section 301 report, also released yesterday, contains further detail on specific Chinese acts, policies, and practices related to technology transfer, intellectual property, and innovation that USTR found are unreasonable or discriminatory and burden or restrict U.S. commerce. In particular, USTR concluded that the following acts, policies, and practices, among others, result in the unfair and harmful acquisition of U.S. technology: Forced or pressured technology transfer: the Chinese government's use of foreign ownership restrictions , other foreign investment restrictions, and the administrative licensing and approvals process to require or pressure the transfer of technology from U.S. companies to Chinese entities.

IP licensing restrictions: the Chinese government's requirements that U.S. companies seeking to license technologies to Chinese entities must do so on non-market-based terms that favor Chinese recipients.

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Publication:Mena Report
Geographic Code:9CHIN
Date:Mar 24, 2018
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